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Monday, April 21, 2014

Testing the validity of the assumption, that the errors in a regression model are normally distributed, is a standard pastime in econometrics. We use this assumption when we construct standard confidence intervals for, or test hypotheses about, the parameters of our models. Ina post some time ago I pointed out that this assumption is actually is sufficient, but not necessary, for the validity of these inferences.

More recently, here and here, I discussed some aspects of the normality test that most econometricians use - the asymptotically valid test of Jarque and Bera (1987). Let's refer to this as the JB test. In the first of those posts I made brief mention of the finite-sample properties of the JB test, and I concluded:

"However, more recent evidence suggests that the power of the J-B test can be quite low in small samples, for a number of important alternative hypotheses - e.g., see Thadewald and Buning (2004). I'll address this aspect of the J-B test more fully in a later post."

The main results obtained by Thadewald and Buning are summed up in the abstract to their paper .............

Here's a follow-up to my recent post about the Federal Reserve U.S. macroeconometric model being freely available in EViews format

Ray Fair's well-known model for the U.S. economy is also now available in a form that's ready to play with in EViews. See here. This is a great teaching tool, and a terrific resource for econometrics students.

In case you're looking for some special fun, Ray is looking for someone to convert his multi-country (MC) model into EViews format, so that it will also be freely available to all of us. The MC model covers 38 countries, and is described here.